This is a foregone conclusion that the financial services sector will be placed under a stricter regiment of regulation. The period of de-regulation will probably be delayed for about 10 years, as the government regulators and the sectors sort out the damage of what has taken place.
Regardless of the cause of the wholesale sector failure, the simple fact remains that US taxpayers now own majority stakes in AIG, Fannie Mae, Freddie Mac and probably soon several major banks. My current belief is that the market failure resulted from shifting regulatory guidance and efforts.
Whenever, regulators shift the basis or content of their regulations and change the regulatory perception to industry participants, a vacuum is established. The vacuum causes the industry and individuals to adjust their behavior. Some of this behavior adjustment results in less than desirable outcomes.
Whenever the paradigm of an industry is shifted, there are benefits and costs. This benefits and costs need to evaluated from a societal point of reference. Obviously, the costs from the current system of the Fed Reserve and SEC is perceived to be greater than the benefits derived from it.
“You don’t allow the fox to guard the henhouse.” They de-regulated the phone company and look what happened. They de-regulated the airline industry and look what happened. They de-regulated financial institutions and now look what happened. I welcome regulation…..by independent, competent people with credibility and integrity. The unfortunate reality is Amercian has never done anything proactively. We boast about our ability to RECOVER from adversity, but we do nothing until somebody has a gun to our heads. This situation is no different. VOTE CHANGE ON NOVEMBER 4TH.
The experiences that you cite of the phone companies, airlines and even electric and gas utlities qualify as “natural monopolies”. There is a high barrier to entry as a phone, airline, or electric company. Usually, heavy infrastructure investments that reduce the number of suppliers. Deregulation of a natural monopoly is usually not in the best interest of consumers due to the limited number of suppliers-collusion often does result from these natural monopolies.
In terms of financial services, the level of capital capacity is an easier barrier to overcome and gain entry into the market. However, as you pointed out regulation is essential as pure capitalist is a brutal system that tends toward cycles of boom and bust. And when lots of money is involved, ethics become an easy to get around nuisance.
In the final analysis, this is the Enron of the banking/financial services world.
Dread has been pushing for “change” in this forum for a while now. I must be missing the “change” he is talking about because all I see is a chosen one that is tightly connected to the far left string pullers that pushed for the sub-prime loans and what lead to the collapse of Freddie and Fannie.
The point is that not one political party or politician is entirely to blame or completely exonerated. Both parties have been involved in the deregulation process and the failure of regulatory oversight. Besides your missing the point, regulatory theory and practices have changed and will continue to evolve. Regulation exists at levels that society deems necessary.
From a historical perspective, the Robber Barons of the 1870s-1900s brought the first wave of regulation-the Sherman Anti-Trust Act, the Pure Food and Drug Act, etc. The second wave of regulation came as a result of the Great Depression-SEC Act of 1933, SEC Act of 1934, etc. The third wave is forming and will reshape the financial services industry.
Stop blaming each other and start corresponding in a respectful and positive way. I am sure when Rome was burning a lot of blaming was going on. Well, the financial Rome is burning so stop blaming each other’s political party and pick up a bucket of water.
No wonder we are having problems, this is not a game of chicken.
A look back at history will show that each time there has been deregulation of certain markets ( Banking, Insurance, Stockbrokers, IE; Wall street) that there soon followed either a bad recession or a depression. It dates back to even 1836 when Andrew Jackson called the bankers vipers and theves and said by god in heaven above I will see you regulated before I am done. That was in another mortgage scandal which affected about 10,000 mortgage holders. I am a conservative by nature but certain industries have to be regulated to keep the theves out of the American Pocketbook.
I would hope that one of the things done would be to re-enact the McCarren Ferguson Act and restrict Banking to just be in Banking and no other business again. It worked pretty well after the 29 crash for about 50 years, and it should be done again on a permanant basis this time. I have been in the insurance sector for over 44 years now and I am appalled at some of the company practices like AIG.
I totally agree! It seems that ever since Banks have been allowed to get into insurance and Insurance have been allowed to call themselves finacial products companies, the lines have been merged and the games began. Neither belongs in the others industry. Ever! Just greedy people wanted this to happen. It was much more regulated before this all began.
I respectfully do not think they are playing chicken. I believe they have both had their hands in the golden pot so long that neither one wants to give it up or admit that they are just as guilty as the other side. If the truth be known i suspicion that both the Democrats and republicans alike have their special interests projects(which no doubt includes them personally in some fashion) and neither want to walk away from such an easy way to make money for retirement! Really sad , but more true than we know. Our best interest are not being served. That has shifted . Their best interest are being served since they make and pass the laws. We are at the bottom of the food chain here. The sooner all of us realize that the better off we will be. Whether Obama or mccain, the choice is the same as related to our best interest being served. One serves to increase debt loads and give back to the less fortunate and the other proposes no increases and proposes tax advantages for bsuienss so they will keep the economy moving forward with expansion and new jobs and less government. Neither said i tell you what, The current sitting congress has agreed to get rid of all of the pork barrel projects, special interest projects, and just let our taxes take care of us which what they originally were suppossed to do. We are supporting way too many other interest to make this work. Less spending, less projects, less graft is the way to go. Everyone would be better off. problem is no candidate will ever run and propose that because they would have to take less and so would their party. Wrong, wrong.
This is a foregone conclusion that the financial services sector will be placed under a stricter regiment of regulation. The period of de-regulation will probably be delayed for about 10 years, as the government regulators and the sectors sort out the damage of what has taken place.
Regardless of the cause of the wholesale sector failure, the simple fact remains that US taxpayers now own majority stakes in AIG, Fannie Mae, Freddie Mac and probably soon several major banks. My current belief is that the market failure resulted from shifting regulatory guidance and efforts.
Whenever, regulators shift the basis or content of their regulations and change the regulatory perception to industry participants, a vacuum is established. The vacuum causes the industry and individuals to adjust their behavior. Some of this behavior adjustment results in less than desirable outcomes.
Whenever the paradigm of an industry is shifted, there are benefits and costs. This benefits and costs need to evaluated from a societal point of reference. Obviously, the costs from the current system of the Fed Reserve and SEC is perceived to be greater than the benefits derived from it.
“You don’t allow the fox to guard the henhouse.” They de-regulated the phone company and look what happened. They de-regulated the airline industry and look what happened. They de-regulated financial institutions and now look what happened. I welcome regulation…..by independent, competent people with credibility and integrity. The unfortunate reality is Amercian has never done anything proactively. We boast about our ability to RECOVER from adversity, but we do nothing until somebody has a gun to our heads. This situation is no different. VOTE CHANGE ON NOVEMBER 4TH.
Dread,
The experiences that you cite of the phone companies, airlines and even electric and gas utlities qualify as “natural monopolies”. There is a high barrier to entry as a phone, airline, or electric company. Usually, heavy infrastructure investments that reduce the number of suppliers. Deregulation of a natural monopoly is usually not in the best interest of consumers due to the limited number of suppliers-collusion often does result from these natural monopolies.
In terms of financial services, the level of capital capacity is an easier barrier to overcome and gain entry into the market. However, as you pointed out regulation is essential as pure capitalist is a brutal system that tends toward cycles of boom and bust. And when lots of money is involved, ethics become an easy to get around nuisance.
In the final analysis, this is the Enron of the banking/financial services world.
Dread has been pushing for “change” in this forum for a while now. I must be missing the “change” he is talking about because all I see is a chosen one that is tightly connected to the far left string pullers that pushed for the sub-prime loans and what lead to the collapse of Freddie and Fannie.
The point is that not one political party or politician is entirely to blame or completely exonerated. Both parties have been involved in the deregulation process and the failure of regulatory oversight. Besides your missing the point, regulatory theory and practices have changed and will continue to evolve. Regulation exists at levels that society deems necessary.
From a historical perspective, the Robber Barons of the 1870s-1900s brought the first wave of regulation-the Sherman Anti-Trust Act, the Pure Food and Drug Act, etc. The second wave of regulation came as a result of the Great Depression-SEC Act of 1933, SEC Act of 1934, etc. The third wave is forming and will reshape the financial services industry.
Stop blaming each other and start corresponding in a respectful and positive way. I am sure when Rome was burning a lot of blaming was going on. Well, the financial Rome is burning so stop blaming each other’s political party and pick up a bucket of water.
No wonder we are having problems, this is not a game of chicken.
A look back at history will show that each time there has been deregulation of certain markets ( Banking, Insurance, Stockbrokers, IE; Wall street) that there soon followed either a bad recession or a depression. It dates back to even 1836 when Andrew Jackson called the bankers vipers and theves and said by god in heaven above I will see you regulated before I am done. That was in another mortgage scandal which affected about 10,000 mortgage holders. I am a conservative by nature but certain industries have to be regulated to keep the theves out of the American Pocketbook.
I would hope that one of the things done would be to re-enact the McCarren Ferguson Act and restrict Banking to just be in Banking and no other business again. It worked pretty well after the 29 crash for about 50 years, and it should be done again on a permanant basis this time. I have been in the insurance sector for over 44 years now and I am appalled at some of the company practices like AIG.
I totally agree! It seems that ever since Banks have been allowed to get into insurance and Insurance have been allowed to call themselves finacial products companies, the lines have been merged and the games began. Neither belongs in the others industry. Ever! Just greedy people wanted this to happen. It was much more regulated before this all began.
I respectfully do not think they are playing chicken. I believe they have both had their hands in the golden pot so long that neither one wants to give it up or admit that they are just as guilty as the other side. If the truth be known i suspicion that both the Democrats and republicans alike have their special interests projects(which no doubt includes them personally in some fashion) and neither want to walk away from such an easy way to make money for retirement! Really sad , but more true than we know. Our best interest are not being served. That has shifted . Their best interest are being served since they make and pass the laws. We are at the bottom of the food chain here. The sooner all of us realize that the better off we will be. Whether Obama or mccain, the choice is the same as related to our best interest being served. One serves to increase debt loads and give back to the less fortunate and the other proposes no increases and proposes tax advantages for bsuienss so they will keep the economy moving forward with expansion and new jobs and less government. Neither said i tell you what, The current sitting congress has agreed to get rid of all of the pork barrel projects, special interest projects, and just let our taxes take care of us which what they originally were suppossed to do. We are supporting way too many other interest to make this work. Less spending, less projects, less graft is the way to go. Everyone would be better off. problem is no candidate will ever run and propose that because they would have to take less and so would their party. Wrong, wrong.